The Customs Pit & The Pendulum

by M. Sigmund ShapiroJune 16, 1999

When I first started in this business in the late Jurassic era, my dad would caution me to beware of the Customs Special Agent. At the same time, he would regale me with stories of Christmas parties thrown at the Customs Bureau (in those days) headquarters in Washington, to which all were invited- importers and brokers alike. These soirees often culminated in a crap game at the Wardman Park Hotel, just across the street, where a blanket was spread out on the floor of a hotel room for the convenience of the participants. For fear of damaging their legendary status, I won’t mention the names of the Commissioners, deputies and assistants who wore out the knees of their suits during the heat of play.

This conflicting image of the Service has followed it from 1789 onward, as enforcement and facilitation have done a pas de deux depending on conditions, economic, political or perhaps even digestive.

When my father feared the agents, it was for good reason. Paper documentation had to be exact, and Customs valuation bore the threat of heavy sanctions. If goods were found to be undervalued, there was an automatic penalty of one percent for each one percent of under valuation. And, since duty rates were high, classification was carefully scrutinized and invoice descriptions were looked at with a jaundiced eye.

Things changed after World War II. In our desire to rehabilitate Europe, imports flooded in, but Customs scarcely looked at them. So-called “department store goods” invoices could be several inches thick, and importers looked for the best duty rate. Customs was, as usual, short handed and could barely keep up with the flood. Entries were liquidated “no change” just to get rid of them. One rarely saw “ornamented” wearing apparel. Everything was non-ornamented to avoid the higher duty.

The pendulum swung back the other way during the Nixon years, bringing the specter of penalties back into focus. Chinese goods mismarked as coming from Macao or Hong Kong were prevalent. And drug intervention fell primarily on the shoulders of Customs (who, naturally, were still short of help). Seizures proliferated and petitions for relief entered an endless bureaucratic maze.

The passage of the Customs Modernization Act was another sea change. Customs maneuvered to place a gorilla, not a monkey on the back of the unwary importer. No longer was the classification what the importer felt was right, to be changed by Customs if necessary. It was now the primary obligation of the importer to “get it right”. And, since the government was becoming “paperless” virtually the whole paper burden was transferred to the importer; with appropriate fines, starting at $10,000 for each document that couldn’t be found!

Trade is becoming more complex with multinationals making valuation difficult. Components are being sourced from different parts of the world making country of origin marking virtually impossible and, in my opinion, redundant and unnecessary. Duties are disappearing making quotas and other agency admissibility tests the coin of the realm. Protectionism is rising, to the detriment of everyone, especially the underdeveloped countries who are forced to defend every dumping or countervailing duty attack.

Perhaps, however, in this age of compliance audits, strategic examinations, CAT teams, Customs account managers and overzealous Customs agents, the process (not just the ACS system) might get overloaded, and another Customs reorganization will simplify things.

But even then, I doubt the crap games will come back.

We're Different

And we're proud to admit it! We treat our clients like friends. We tell it to you like it is. We turn up the heat when we need to. And we expect you to do the same!